Profit tax

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This article is about taxation in Hong Kong. For corporate profit tax (general), see corporate tax.

Profit tax in Hong Kong is Direct tax and also classified into Income tax.

According to Cap.112 Hong Kong Ordinance, Inland Reveue Ordinance (in short, IRO) IRO Section 14, unless otherwise provides, profit tax shall be charged at the standard rate on any person who carries on a trade, profession or business in Hong Kong and assessable profits arising in or derived from Hong Kong for a year of assessment.

1 Tax computation
- 1.1 Approved charitable donations
2 Profit Taxpayer
3 Year of Assessment
4 Badges of Trade
5 See also
6 Reference links

[edit] Tax computation

The formula is:

HK profit tax payable = Net assessable profit X Profit tax standard rate

Net assessable profit = Assessable profit - Loss brought forward (if any) + Loss transferred from partnership (if any)

Assessable profit = Profit or (Loss) per financial account + (Disallowable expenses charged in account - Non-taxable income credited in account) - Depreciation allowances - Approved charitable donations

[edit] Approved charitable donations

The Approved charitable donations are limited to 10% of the amount after deducting of the Depreciation allowances, per IRO Section 16D.

[edit] Profit Taxpayer

The term person includes corporation, partnership, trustee and sole properiter and so on.

[edit] Year of Assessment

The period of assessment mostly is from April 1st to March 31st of the following year, but it is up to taxpayer's wish with reasonable excuse. The example is financial year of the business.

[edit] Badges of Trade

Any trade may be subject to profit tax unless a reasonable man can provide evidence to proof that there is no any revenue profit. In Hong Kong, capital profit is not subject to tax.

In order to proof the nature of a trade, the badges of trade are to be considered including the taxpayer's intention of profit, the length of ownership, frequency of similar transactions, reason for disposal, supplementary work and so on.